Noyack’s New REIT Takes Broad Approach to Logistics Investment

Noyack Capital last week held the inaugural closing of the Noyack Logistics Income REIT I (NLI) with a $37 million initial raise.

The company uses a diversified approach focused on all commercial real estate supporting America’s supply chain. Noyack’s portfolio runs the gamut to include cold storage facilities, giant dry warehouses, medical office buildings, life sciences labs, and parking lot conversions into hybrid facilities known as mobility hubs.

Onshore Decentralization of e-Commerce Accelerating

CBRE Supply Chain Advisory reports that transportation costs typically account for 50% to 70% of a company’s total logistics spend, while fixed facility costs (including real estate) account for only 3% to 6%. 

CJ Follini, managing partner of Noyack Capital, NLI’s external manager, tells GlobeSt.com that Noyack Logistics Income REIT analysts have spent most of the past year analyzing what they believe will become the next intermodal hubs. 

“Onshore decentralization of ecommerce goods and products is rapidly accelerating and holding more inventory will be key to minimizing supply chain disruptions,” Follini said.

“Companies will also prefer to hold more inventory near large population concentrations with robust intermodal access in addition to the legacy supply chain locations such as seaports, inland ports and major air hubs.”

New industrial markets are emerging worldwide, driven by the need to store more inventory and diversify manufacturing sources to counter supply chain disruptions. Among them: Columbus, Ohio; Boise, Idaho; Lower Ontario (Michigan & Canada); Indianapolis; and Reno, Nev.

Noyack Capital estimates that it takes roughly an 8% increase in fixed facility costs to equal the impact of just a 1% increase in transportation costs. Based on this data, it appears that increasing inventories by adding more warehouse and distribution space could significantly reduce transportation costs for many shippers.

Follini said in a release that his company’s thesis suggests logistics assets are undervalued relative to the market maturity of ecommerce and that they offer asymmetric risk-reward potential.

NLI avoids overvalued assets by using a tremendous amount of data to triangulate price anomalies across all supply chain properties, while many of the biggest investors – Prologis, Blackstone, or KKR – get caught by the essential real estate question, Follini said in a release.

“Why keep buying plain warehouses when they are too expensive, just because of self-imposed restrictions holding their portfolio to that one asset type?” he said.

NLI uses asset diversification of high-yielding, stabilized assets and then refinances them to add additional cash flow to a conservative leverage of 65%, the company said. 

“This strategy allows NLI to target a 20% annual rate of returns and 6% preferred returns each year without the industry-standard fees of more than 3%,” according to Follini.

NLI states other key points of differentiation include that it gives access to all investors at any amount and that key management have invested significant personal capital exhibiting their “skin in the game.”